Funds Tied To Madoff Win a Ruling To Stop Suits

By BLOOMBERG NEWS

Published: March 5, 2010

UBS and Ernst & Young won a court ruling Thursday in Luxembourg, potentially blocking hundreds of claims by investors who had lost money in funds tied to Bernard L. Madoff's fraud.

Luxembourg's commercial court said that investors could not bring individual lawsuits for damages. The court said it was up to the liquidators of the funds that invested with Mr. Madoff to seek the ''recovery of the capital assets.''

Investors who lost millions of dollars through Access International Advisors' LuxAlpha Sicav-American Selection fund had filed more than 100 lawsuits against UBS and Ernst & Young for ''seriously neglecting'' their fund supervisory duties. Luxembourg's commercial court in April 2009 decided to hear some of the cases to test whether the claims were admissible.

UBS served as the custodian for LuxAlpha. Custodians are responsible for oversight of funds and manage deposits and payments to investors.

''UBS welcomes the clarification of Luxembourg law as expressed by today's decisions,'' Tatiana Togni, a spokeswoman for the bank, said in an e-mail message.

Spokesmen for Ernst & Young in Luxembourg could not immediately be reached to comment. LuxAlpha, which invested 95 percent of its assets with Mr. Madoff, said it had $1.4 billion in net assets a month before Mr. Madoff's arrest in December 2008. The fund was dissolved and is being liquidated.

Luxembourg is the second-largest mutual fund market after the United States, with about 3,463 registered funds holding 1.84 trillion euros ($2.5 trillion) in assets.

Fran?s Brouxel, who represented investors in four of the test cases and has more than 60 others pending, said he would appeal the court's finding. He said the ruling ''is in direct contradiction with E.U. rules and will have repercussions for the Luxembourg financial market if investors feel they are not protected.''

Mr. Madoff, 71, pleaded guilty last year in federal court in Manhattan and was sentenced to 150 years in prison for using money from new clients to pay earlier investors.